Automotive and aircraft engineering company GKN said it would cut more than 5 percent of its staff worldwide and close plants as turbulence in the automotive sector deepens.
The company also said it expects pretax profit for the fourth quarter to be materially below its mid-year guidance.
Its shares nose-dived 30 percent following the news, making it the biggest faller among mid-cap stocks in the London market. At 12:51 p.m., the stock had pared some losses to trade down 22.6 percent at 91 pence.
GKN said the fourth quarter will be hit by weakness in the automotive industry as well as by a strike at U.S. aircraft maker Boeing, and it now expects full-year pretax profit to fall around 20 percent from 2007.
In response, GKN will shut down plants, introduce short-time working and cut its workforce, it said.
Chief Executive Kevin Smith told Reuters he would lay off all 1,400 of the group's temporary staff, which represents 5 or 6 percent of its work force, and go beyond that level of cutbacks.
"In the space of a few months we've gone from really good growth to a position that our business has never seen before," Smith said of the company's automotive section.
Global carmakers are facing a sharp drop in sales as consumers put off major purchases on fears of a recession and credit becomes more expensive or unavailable.
Smith said capital expenditure would be scaled back from 1.2 times depreciation, which was 191 million pounds, last year to 0.7 times for next year.
For the third quarter, the company said pretax profit fell by 4 million pounds and that, on a constant currency basis, sales were slightly ahead of last year.
GKN said its plan to buy parts of the Filton site near Bristol in western England from EADS unit Airbus remains on track for completion in January 2009.
Arden Partners, which has a "neutral" stance on the stock, said the shares are unlikely to find favour before the end of 2009. It added that the company is an unlikely bid candidate given its business spread and pension deficit.
Evolution Securities said "(The GKN comments) have come in lower than expected.
"The positives are a proven track record in taking cost out and the benefits of the low cost manufacturing realignment programme of the last four years combined with its market shares," added the broker, which has a "buy" stance on the stock.
The broker said it believes the company will cut its dividend to about 5 pence per share.
(Editing by Quentin Bryar and Erica Billingham)
6 months ago